Retirement options The minimum age from which benefits can be taken will initially be 50, but this will be increased to 55 from April 2010. You no longer need to stop working to take your company pension; you can take your pension money whilst continuing to work. You have 3 options at retirement: You can take a proportion of your pension as a tax-free lump sum. This will depend on the rules of the scheme- the limit is 25% for a SIPP. You can use your fund, or the remainder of your fund to take secured income. (i.e. buy an annuity by paying a lump sum to a life insurance company, who undertake to pay you an income). There are many different types of annuity- some offer guarantees or will pay income to a surviving spouse, others are linked to investments From 6 April 2006, the compulsion to buy an annuity by age 75 was removed. You can pay yourself an income from the fund/ remainder of the fund. This income needs to be between HMRC limits and is usually paid from a pension investment portfolio designed with income payments in mind. It is known as unsecured pension (if taken between ages 50 and 75) and alternatively secured pension if continued beyond age 75. You can use these 3 options across your pension, for example, taking tax-free cash and buying an annuity from part of your pension, drawing income from another part and deferring taking benefits from the third part. There are rules which limit the amount of income you can pay yourself if you take unsecured or alternatively secured pension: Unsecured pension Up to age 75, the income must not exceed 120% of a single life annuity, based on the Government Actuary’s Department (‘GAD’) annuity rates and this must be reviewed every five years. The minimum income is £0. Alternatively secured pension From age 75, the income must not exceed 90% of a single life annuity, based on the Government Actuary’s Department (‘GAD’) annuity rates for someone aged 75 (regardless of the individual’s actual age) and this must be reviewed annually. The minimum income is 65% of the GAD figure. This area of retirement planning is especially confusing and complex. There are many factors that need to be considered not least your health, your family and your understanding of risk. We strongly recommend that you obtain advice. To speak with an adviser, please call 0870 777 0368 or use our enquiry form. Triviality Small pensions may be commuted for an immediate cash sum as long as the member’s total pension rights from all registered schemes do not exceed 1% of the lifetime allowance. 25% is tax free and the remainder will be subject to income tax.